Canada’s annual inflation rate accelerated to two per cent last month. (THE CANADIAN PRESS/Jonathan Hayward)

Inflation rises as higher airfares, veggie prices offset cheaper gas

Statistics Canada says inflation accelerated to two per cent in December

Canada’s annual inflation rate saw an unexpected acceleration to two per cent last month as higher costs for airfares and fresh vegetables offset cheaper prices at the pump, Statistics Canada said Friday.

Year-over-year prices picked up their pace in December after inflation was just 1.7 per cent in November, the agency said in its latest consumer price index. A consensus of economists had expected inflation to register 1.7 per cent for December, according to Thomson Reuters Eikon.

READ MORE: B.C. rent increases capped to inflation, 2.5% for 2019

But even as overall inflation advanced at a faster clip last month, the average of three core inflation readings remained flat at 1.9 per cent, close to the Bank of Canada’s ideal two per cent target.

Experts believe Friday’s core figures mean there’s no inflation-fuelled urgency for the Bank of Canada to raise its trend-setting interest rate.

“They will see that there’s no acceleration in (core) inflation, so they can be patient in the coming months,” National Bank of Canada deputy chief economist Matthieu Arseneau said of the central bank governing council in an interview.

“For the Bank of Canada, the focus has changed a bit (to be) more on growth for the coming months, so I think that for now (the inflation) report is less important.”

Core inflation, which excludes more-volatile components like gasoline, is the Bank of Canada’s preferred measure. The central bank, which can raise its rate as a way to keep inflation from climbing too high, pays close attention to the core numbers ahead of its policy decisions.

“Despite the upside surprise to headline inflation, core measures continued their 2018 theme of slow and steady,” TD senior economist Brian DePratto wrote in a research note to clients Friday.

“These may be somewhat backwards-looking indicators, but the message remains clear: there are few signs of fundamental inflationary pressure at the moment.”

A closer look at the numbers showed that lower gas prices, down 8.6 per cent last month, kept headline inflation from being even higher. Excluding gasoline, inflation was 2.5 per cent in December.

Compared with a year earlier, Statistics Canada said Canadians paid 14.9 per cent more for fresh vegetables and 28.1 per cent more last month for air transportation — mostly due to higher travel prices during the holidays.

DePratto noted that observers should remain cautious about year-on-year airfare comparisons because Statistics Canada introduced a methodology change for the category in early 2018.

Inflation was also up last month due to a 7.5 per cent boost in mortgage interest costs, a 3.8 per cent increase in restaurant bills and 5.1 per cent rise in passenger vehicle insurance premiums.

Andy Blatchford, The Canadian Press

Like us on Facebook and follow us on Twitter

Just Posted

Saanich mayor begins living roof planting process

A garden will top Mayor Fred Haynes’ new home on Prospect Lake

UVic student killed in bus crash remembered as passionate, kind

Emma Machado, 18, killed in bus crash near Bamfield on Friday

U.S. student killed in Bamfield bus crash remembered as ‘kind, intelligent, talented’

John Geerdes, 18, was one of two UVic students killed in the crash on Friday night

MLA Andrew Weaver thins workload after illness, full recovery expected

BC Green Party leader felt symptoms at a public event in Langley, and was taken to hospital

VIDEO: Flames pick up 4-3 exhibition win over Canucks in Victoria

Vancouver split squad manages 3-2 OT triumph in Calgary

Canucks sign Brock Boeser to three-year, US$17.6-million deal

Young sniper will be in Vancouver Tuesday

B.C. forest industry looks to a high-technology future

Restructuring similar to Europe 15 years ago, executive says

RCMP conclude investigation into 2017 Elephant Hill wildfire

Files have been turned over to BC Prosecution Service

B.C. wants to be part of global resolution in opioid company bankruptcy claim

Government says settlement must include Canadian claims for devastation created by overdose crisis

Two Nanaimo residents share $5-million Lotto 6/49 prize

Jesse Logan and Teresa Winters Day matched all six numbers in Aug. 21 Lotto 6/49 draw

Island campground on the chopping block as ALC deadline looms

Owners fighting to continue facility’s operation, with a huge outpouring of support

B.C. ends ‘birth alerts’ in child welfare cases

‘Social service workers will no longer share information about expectant parents without consent’

Most Read